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Is the residential construction sector heading for a crash?

* The following article has been published by Stuff NZ

New home build inquiries have declined steeply since last year, and residential construction intentions have plummeted – but the industry expects it will avoid a global financial crisis-style crash this time around.

ANZ's latest business outlook shows residential construction intentions have plummeted to a fresh low, down to a net -73.7% in July from -57.9% in June.

A reading of zero would mean the sector was evenly split on whether the outlook was positive or negative.

Consents are currently at historic highs, with 50,736 issued in the year ended June. But, on a monthly basis, the number of dwelling consents fell 2.3% in June, and it was the third monthly decline in a row.

With ongoing rises in costs, delays due to supply chain issues, and a string of building company liquidations, no-one expects the construction boom to continue, but there is much speculation around how bad the fall-out could be.

Group home builders, such as Signature Homes, Stonewood Homes and Jennian Homes, say demand is lower than it was previously, and inquiries and sales have slowed.

“One builder had 48 homes that people had signed up for, and those buyers have all now walked away from them. That is a huge change in order numbers, and it hits hard. The level of demand has fallen, and an industry slowdown is on the way.”

We still see buyer demand out there, but many buyers are sitting on the sidelines because they can not get finance, or because they want to see what happens with the market; waiting in the shadows to see what happens with interest rates and house prices.

“When there is more certainty, they will re-enter the market, but over the next year or so we’ll see a collective focus on falling consent numbers. This will be a mild reality check for the home building sector, but it won’t be a horror show.

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